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Trust Says Polygamists Ran Slush Fund

SALT LAKE CITY (CN) - A polygamous sect on the Utah-Arizona border diverted $1.7 million from a water company for a slush fund to buy cars and insurance and pay bills for sect members, a trust claims in court.

The United Effort Plan Trust sued Twin City Water Works on March 11, in Salt Lake County Court.

Twin City Water Works (TCWW), founded as a nonprofit community water system in 1972, sold its distribution system to the cities of Hildale, Utah, and Colorado City, Ariz., in 1996.

Utah took over the $110 million trust in 2005, amid underage rape charges against now-incarcerated fundamentalist leader Warren Jeffs.

Members of the Fundamentalist Church of Jesus Christ of Latter-day Saints began fighting for the trust - which includes more than 700 houses, farms, dairies and other businesses in the twin cities - in 2008.

The trust says in the complaint that recent depositions show that TCWW managers are "completely unaware" of how the company is run, "strengthening the trust's concerns that the business and its funds are still being used as an FLDS slush fund."

Trust fiduciary Bruce Wisan, charged with overseeing and administering United Effort Plan (UEP) Trust assets, says in the complaint that TCWW pumped and sold UEP well water without valid leases.

"In the [water system sale] agreements, the parties state that TCWW 'owned certain rights to pump well water on land owned by the United Effort Plan, a common law charitable trust, as provided un unrecorded leases between company [Twin City Water Works] and the UEP,'" the 15-page complaint states.

It continues: "The fiduciary has recently learned and concluded that there are not, and have never been, valid leases between UEP and TCWW which provide for TCWW to pump or use groundwater from UEP property."

Nonetheless, Wisan says, TCWW pumped water from the wells and sold it to the twin cities, "and continues to do so."

Wisan says that TCWW has not maintained a physical address or contacted the trust during his time as fiduciary.

"Instead, TCWW has concealed from the fiduciary and the public that taking of funds it earned from selling trust water to the cities and diverting those funds to FLDS purposes and/or for improper personal uses of TCWW's management," the complaint states.

In related litigation filed by the Department of Justice against the twin cities, "it was discovered that between 2004 and 2013, TCWW improperly diverted approximately $1,729,987.29 to a series of activities unrelated to business operations of TCWW," according to the complaint.

But the TCWW articles of incorporation obligates TCWW to spend "all" of its money on operation, maintenance, development and expansion of the water system, the trust claims.

"No officer, director, member or shareholder of TCWW has been willing to come forward to challenge TCWW misuse of funds because to do so would be to countermand FLDS demands on TCWW's funds, and consequently risk the loss of family, home, priesthood, and religious status," the complaint states.

TCWW's former president Joseph Allred, in an April 23, 2006 letter to Jeffs in 2006, said FLDS members' home utility and cell phone bills, cars, and car insurance were paid for by TCWW.

The letter, which begins, "My Dear Holy Prophet Uncle Warren," is included in the lawsuit. The trust claims it was written while Jeffs was a fugitive from state and federal charges.

Allred, who is Colorado City's mayor today, added in the letter that TCWW had been making about $400,000 a year, and that the company had "never been audited."

Allred recently pleaded the Fifth Amendment when asked about TCWW's "unrecorded leases," during separate federal proceedings in Arizona.

"Recent depositions of TCWW reveal that its current management is completely unaware of basic facts concerning the finances and operations of the business, strengthening the trust's concerns that the business and its funds are still being used as an FLDS slush fund," the Utah complaint states.

It adds: "The president of TCWW admits that others 'are bleeding this company dry by using the money for illegal and unauthorized purposes' but he has done nothing about it because he is in a 'sensitive position.'"

Despite repeated requests for documents regarding TCWW's right to take UEP's water, Wisan says, the company has "failed and refused to provide any such documentation."

Colorado City and Hildale have long been a haven for FLDS members, a polygamous breakaway sect.

In 2012, the Department of Justice claimed the sect controlled the area's police force and ostracized nonmembers.

Recently, the Justice Department added that the towns' police altered official reports and destroyed dispatch recordings.

The Utah Supreme Court separately ordered state officials to pay more than $5 million for legal debts incurred by Wisan.

Jeffs and the FLDS sued Wisan over an $8.8 million judgment in 2013, claiming it was "based upon false, incomplete, and misleading evidence."

Jeffs, 59, was convicted in Utah in 2007 of two counts of first-degree felony rape for his role in the 2001 wedding of a 14-year-old girl to her 19-year-old cousin. The convictions were reversed on the basis of erroneous jury instructions.

Jeffs received a life sentence plus 20 years in Texas for sexually assaulting two girls he claimed were his "spiritual wives." He is said to still head the polygamous sect from prison.

The trust seeks injunctions requiring TCWW to pay "reasonable compensation" for groundwater already taken and requiring UEP to offer groundwater to the cities, plus the appointment of a receiver.

It is represented by Jeffrey Shields with Callister, Nebeker & McCullough.

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